what is a short sale
In real estate, a short sale is a sale in which the proceeds of the sale fall short of the balance owed on a property’s loan. This usually happens when the homeowner or the borrower can no longer pay the mortgage. In this sale, the borrower will have to present the sale proposal to his lender rather than risk foreclosure. The lender then will decide that selling the property at a moderate loss is better off than pressuring the current debtor. There should be consent by both parties before a short sale is done.
A homeowner facing foreclosure lets say, for example has an existing mortgage of $400,000. He or she could write an offer to the lender for a sale of $320,000, which is accepted as full loan payment. Why do banks accept this sale proposal? Simply because banks dislike excessive bad loans and excess inventory on their books and will look for a chance to sell the property without a big loss. Lenders too will favor a short sale than an auction because of the many fees involved in an auction, and it would be much convenient taking the discount and be done with the unnecessary headache of an unpaid loan.
It does not really matter what kind of house or the condition it is in, all mortgages can be discounted. The best homes to perform short selling are those that need plenty of repairs and work because a lender could give you a bigger discount. Typically, there are additional considerations that could convince a lender to agree to this type of sale, including if the home is located in a bad area where sales are low.
Short sales could affect a person’s credit report, although its impact is normally less than a foreclosure. This could remain on his or her credit report for seven years, depending upon the other credit information. It is possible to be able to get another mortgage one to three years after a short sale.
It is best done when a homeowner or borrower is ninety days behind on his or her mortgage payments, and has no other means to settle and not much equity to sell fast. Short sales could also be an exit strategy for a homeowner who may not be delinquent but just staying afloat and anticipating a delinquency.
Homeowners welcome an offer to help avoid foreclosure by doing a short sale. When he or she is in financial bind and is actually four payments behind on the mortgage, a foreclosure could be lurking just around the corner. This will allow a homeowner to eliminate mortgage debts without the cost of repairs to get out from under the home. It also helps to avoid a negative impact on the homeowner’s report.
Seek the help of an expert when negotiating a short sale, it could be the difference between owing tens or thousands of dollars to the bank or the mortgage lender down the road and end up owing not a single cent. Nevertheless, take caution in looking for a real estate agent to help you. Most agents do not know the true meaning of what this sale really means. They are not pros and could even get their clients stuck with owing the bank the forgiven debt.
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HOW TO DO A SHORT SALE in 3 Minutes! – Simple SOFTWARE